OPTIONS: Expiries for Jan22 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1550(E1.6bln), $1.1600-05(E3.1bln), $1.1700(E2.4bln), $1.1800(E789mln)
- USD/JPY: Y156.30-40($2.3bln), Y157.50($588mln), Y158.00($581mln), Y158.75($535mln), Y159.00($1.1bln), Y160.00($1.0bln)
- NZD/USD: $0.5740(N$693mln)
- USD/CAD: C$1.3755-65($597mln)
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GILTS: Early London Range Intact, More Focus On Downside Given Post-BoE Move
Gilt futures stick to the range established in early London trade, with lows holding during a late morning retest before a modest recovery rally.
- Contract last -17 at 90.77.
- Support and resistance of note located at 90.50 & 91.93, respectively. Post-BoE price action tilts focus back to support levels.
- OI in the contract has fallen below levels that prevailed on the day of the Budget.
- Yields 1bp lower to 1bp higher, twist steepening develops a little further.
- 2s10s less than 1bp off the November closing high (79.52bp).
- Recent headline flow has confirmed that the spring forecast will be issued on 3 March.
- No real impact from the ongoing uptick in crude oil futures.
- SONIA futures +0.5 to -2.0.
- BoE-dated OIS continues to indicate ~38bp of easing/just over 50% odds of 50bp of cuts being delivered during ’26.
- Goldman Sachs highlight dovish risks to current pricing, writing “given relatively little BoE easing is now priced (2-Year SONIA remains 50bp above our terminal forecast), and the opposition to further easing seemingly hinges on the perception of upside risks to inflation (which we expect to decelerate meaningfully further), we see risks as skewed to lower yields. Further, with all MPC members acknowledging the slowdown in demand, and the discussion centred more on the cadence than the endpoint of cuts, we think the underlying ingredients supporting disinflation should keep the front-end relatively insulated should activity improve”.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Feb-26 | 3.711 | -1.6 |
Mar-26 | 3.627 | -9.9 |
Apr-26 | 3.517 | -21.0 |
Jun-26 | 3.445 | -28.1 |
Jul-26 | 3.377 | -34.9 |
Sep-26 | 3.363 | -36.3 |
Nov-26 | 3.341 | -38.5 |
Dec-26 | 3.348 | -37.8 |
FOREX: USD Fade Helps Flatter GBPUSD; Headed for Strong Annual Close
USD fade picks up further as equities continue to creep to new highs. Following the stronger open for the e-mini S&P, the USD is slipping again at typing, helping GBPUSD, EURUSD and AUDUSD through Thursday highs in tandem.
- For GBPUSD, this keeps the pair on course for a strong close to 2025, as the currency rallies despite the BoE rate cut last week. Clearance of 1.3471 would mark the highest level since mid-October and make for a near 3.5% rally off the November lows.
- Low (and falling) vol premia are a notable driver here - 3m GBPUSD implied vols are their second lowest for this time of year this side of the year 2000 (only 2012 was lower as of December 22nd).
- There's little sign of any reversal in vol across broader G10 FX, leading to sharp weakness in the implied/realised vol ratio across currency market for all maturities out to 3 months (see chart below). JPY is the sole standout, as intervention risk evident in Katayama's earlier comments helping support the market.
EQUITY TECHS: E-MINI S&P: (H6) Trading Above Key Short-Term Support
- RES 4: 7021.79 0.618 proj Nov 21 - Dec 11 - 18 price swing
- RES 3: 7014.00 High Oct 30 and the bull trigger
- RES 2: 6932.25/6988.00 High Dec 15 / 12
- RES 1: 6832.25 High Dec 15
- PRICE: 6923.00 @ 14:20 GMT Dec 22
- SUP 1: 6771.50 Low Dec 18
- SUP 2: 6737.71 61.8% retracement of the Nov 21 - Dec 11 rally
- SUP 3: 6678.58 76.4% retracement of the Nov 21 - Dec 11 rally
- SUP 4: 6583.00 Low Nov 21
The recent pullback in S&P E-Minis appears corrective. A key short-term support has been defined at 6771.50, the Dec 18 low. A break of this level would signal scope for a deeper retracement of the recent bull phase between Nov 21 - Dec 11. This would open 6737.71, a Fibonacci retracement. For bulls a stronger resumption of gains would refocus attention on key resistance at 7014.00, the Oct 30 high.
